Messaging Works: Don't Underestimate PayPal's Potential

With Paypal unveiling payments via text messaging on cell phones, the debate has already started over the market for payment services on mobile networks. I use the word "market" because, while Paypal doesn't necessarily need to make money beyond the payments it is already owed, someone does. At least that is one side of the argument.

With Paypal unveiling payments via text messaging on cell phones, the debate has already started over the market for payment services on mobile networks. I use the word "market" because, while Paypal doesn't necessarily need to make money beyond the payments it is already owed, someone does. At least that is one side of the argument.As Andy Dornan points out in the Information Week article Don't Count On Your Cell Phone To Replace Your Wallet, the mobile operators will have to see green before they will get behind payments as an additional service. And that has traditionally been the case.

For more than a decade, we've seen how our mobile service providers, the one's who really sell all those cell phones and multifunction devices, have stayed well back from the state-of-the-art. If they can't figure out how to provision a new capability profitably, it won't be provisioned until it becomes a competitive liability not to offer the new feature. We've all scratched out heads and wondered why the cool stuff gets rolled out first in other countries. That's the main reason why.

But I think the PayPal example will force the operators' hands faster than history dictates. The reason: it is based on text messaging, a very popular feature with a very key segment of the cell phone market—teens and young adults. Since PayPal's service rides atop an existing service, all that PayPal's 100 million customers have to do is activate the service using their phones.

That may seem like a long way away from a credit payment button on your phone, but not really. If payments via text messaging gain enough traction (and the teen/young adult segment can be a huge driver) the pressure to differentiate will eventually move the operators. Whether or not they will figure out a way to get a cut of the transactions remains to be seen, but I have to believe that Visa and MasterCard are watching PayPal's new service very closely, and if need be, they'll offer incentives to mobile carriers to get them on board.

History has shown us that the younger generation has a voracious appetite for new messaging capabilities. Anything rolled out as a messaging enhancement will get a serious look.

That may seem like a long way away from a credit payment button on your phone, but not really. If payments via text messaging gain enough traction (and the teen/young adult segment can be a huge driver) the pressure to differentiate will eventually move the operators. Whether or not they will figure out a way to get a cut of the transactions remains to be seen, but I have to believe that Visa and MasterCard are watching PayPal's new service very closely and, if need be, they'll offer incentives to mobile carriers to get them on board.

History has shown us that the younger generation has a voracious appetite for new messaging capabilities. Anything rolled out as a messaging enhancement will get a serious look.

If you thought consumerization killed UC, think again: 70% of our 488 respondents have or plan to put systems in place. Of those, 34% will roll UC out to 76% or more of their user base. And there’s some good news for UCaaS providers.